Company Announcements

Final Results

Source: RNS
RNS Number : 2392K
i-nexus Global PLC
20 December 2022
 

20 December 2022

i-nexus Global plc

("i-nexus", the "Company" or the "Group")

 

Final Results

 

i-nexus Global plc (AIM: INX), a leading provider of cloud-based Strategy software solutions designed for the Global 5000, today provides its audited results for the year ended 30 September 2022 ("FY22").

 

Financial Highlights

 

·    Year on year growth in Underlying Monthly Recurring Revenue1 ("MRR") of 12% to £250k (FY21: £223k) driven by a record number of new business wins and the expansion of existing customer relationships; equivalent Reported MRR1 was £250k (FY21: £235k)

·    Highlighting both the increasing strength of our client relationships and the release of enterprise software budgets, net retention2 in the year was 98% (2021: 74%)

·    Total revenue, 90% of which is recurring, reduced despite a record number of sales to £3,127k (FY21: £3,639k) due to the lagged impact of the exceptional levels of non-renewing contracts in the prior year

·    Cost control initiatives provided a loss before tax for the year in line with FY21 at £1,105k (FY21: £1,133k) despite the movement in revenue

·    Cash & cash equivalents at the period end of £99k (FY21: £575k), with the end of the financial year representing a low cash flow point given the seasonality in recurring revenue collection

 

Operational Highlights

·    Marketing initiatives resulted in record levels of engagement, reach and therefore leads, confirming our ability to rebuild our prospect pipeline

·    Record number of new customers secured in the year, winning nine new logos (FY21: four) and delivering £30k of additional MRR

·    Smaller initial deals have already seen expansion in the year, providing the foundation for a strong existing account growth rate in FY23

 

Post Period End Highlights & Outlook

·    Sales momentum continuing in FY23, with a further three logos signed and one account expansion, producing net MRR growth of £12k

·    Primed to again deliver double-digit net Monthly Recurring Revenue (MRR) growth in FY23, capitalising on the strong prospect pipeline and increased opportunities within our base

Commenting on the results, Simon Crowther, Chief Executive, said: -

"I am pleased to report on a year of solid progress at i-nexus, in which we delivered on all three areas of our strategic plan, resulting in growth in new business wins, a more stable cash runway, and greater clarity on our future direction. The sales successes in the year combined with the significant improvement in customer renewals enabled us to achieve our target of double-digit underlying MRR growth in the year.

The growing interest in strategy software, the relaxation of enterprise software budgets, the enhancements we have made to our products and our increased sales and marketing skills, all combine to provide us with confidence in our outlook and ability to deliver another year of double digit MRR growth."

 

For further information please contact:

i-nexus Global plc

Simon Crowther, Chief Executive Officer

Drew Whibley, Chief Financial Officer

 

Via: Alma PR 

Singer Capital Markets (Nominated Adviser and Broker)

Sandy Fraser / Alaina Wong (Corporate Finance)

Tom Salvesen (Corporate Broking)

 

Tel: +44 (0)207 496 3000

Alma PR

Caroline Forde

Tel: +44 (0)203 405 0205

 

About i-nexus Global plc

i-nexus Global plc ("i-nexus") helps organisations achieve their goals. Whether executing a strategy, driving operational excellence and continuous performance improvement, or coordinating portfolios and programs to transform results, i-nexus strategy software underpins success.

Today, we support organisations in managing over 200,000 strategic programmes around the world.

i-nexus transforms how organisations plan, execute, and track goals. We inspire the confidence to leave behind the spreadsheets, presentations and reports those organisations rely on, replacing it with a cloud-based, collaborative solution.

Throughout this announcement:

1 Underlying MRR excludes MRR movements related to IFRS adjustments and Foreign Exchange variances, these items are included within the Reported MRR value.

 

2 Net Retention is measured by the total of on-going MRR at the year-end from clients in place at the start of the year as a percentage of the opening MRR from those clients.

 

Chairman's Statement

In my 2020/21 Chairman's Report I commented on the immediate challenges that i-nexus faced delivering its Business Improvement and Strategy Deployment software to large enterprises beginning to recover from the global pandemic. Few commentators predicted that 2021/22 would be characterised by even greater economic and political uncertainty. Businesses such as ours benefit from our customers looking forward with optimism and implementing clear long-term strategies across complex organisations. To do so successfully requires certainty and stability which are not conditions which currently prevail across the global economy. Nonetheless, against this challenging sales environment, the team delivered a record number of new logo wins and closed the year with a clear cash runway.

While creating a challenging sales environment in the short-term, these macro-economic changes have highlighted the need for global strategy solutions across large enterprises. Issues such as faltering supply chains, changing distribution models, price inflation, social and environmental factors, and changing working practices are just a few examples of factors influencing large enterprise strategies.

Enterprises have learnt quickly that uncertainty is the new normal and that to succeed their strategies must be deployed faster, with more agility and that tools such as i-nexus can help them to do so.

Last year our three strategic objectives were to manage our cash resources as effectively as possible, while continuing to develop our i-nexus platform and drive our developing sales pipeline as hard as possible with our limited resources. We have not needed further working capital support from our shareholders and, although cash is tighter than we originally forecast, we remain confident given our current projections for FY23 that we will not require further working capital to deliver on our growth plans. If our ambitions change through accelerating sales or unequivocal demand for new product the Board will of course consider all options to fund such growth. It is the Board's responsibility to ensure that i-nexus takes full advantage of the opportunities available to it. It is also incumbent upon the Board to ensure that i-nexus remains at the forefront of its chosen market. We will find the necessary resources, within our limited overhead, to ensure we are looking forward with our customers and market analysts to ensure we can provide broader capability, unlocking a larger and potentially more dynamic market.

Net retention is of course central to the success of any subscription business and we are pleased that this has seen a marked improvement in the year to 98% (FY21: 74%) (measured by the total of on-going MRR at the year-end from clients in place at the start of the year as a percentage of the opening MRR from those clients). We are confident that this positive increase is sustainable over the next 12 months. Importantly we are back winning new customers and although initial engagements are deliberately smaller, the opportunities to grow these accounts following successful initial deployments is, in many cases, contractually assured. New customers, growth from existing customers and improving partner sales all underpin our growth aspirations for 2022/23. In challenging market conditions we have broadly achieved our aims for 2021/22 and look forward with optimism for the current year.

 

As we look forward it is clear that our current market capitalisation has little or no relationship to the underlying value of the business, its customer base, its well established technology or its financial position. It is a reflection of the challenges that many small businesses quoted on AIM currently have.  The Board will seek ways to reengage with the market to help awaken a greater appreciation of the value of the business, while considering all options in the best interest of all stakeholders.

The management team has faced tough times over the last few years and have remained at the helm throughout, never faltering in the most harsh circumstances. During the year, Alyson Levett, our CFO, decided to step down to pursue her career as a pluralist non-executive director. She has been an outstandingly committed executive director, steering the business through its IPO and subsequent challenging economic times. I would like to thank Alyson for her contribution to the business and wish her well with her future endeavors.

We are delighted to have found an exceptional CFO to take up the role, Drew Whibley, joining us from his role as Group Finance Manager at LSE listed software business Aptitude Software Group plc. Drew has fitted into the management team with ease and has already proven a fantastic asset to us and we are delighted to have him on board. In addition I'd like to thank all our employees for their continued commitment to the business, their hard work and dedication.

Without downplaying the obvious challenges ahead in any way, I look forward to the coming years with increased optimism underpinned by a small but exquisitely formed team, a growing market, a sound product, blue chip customers and "baked in" account growth.

 

Richard Cunningham

Chairman

 

Chief Executive Officer's Report

Overview

I am pleased to report on a year of solid progress at i-nexus, in which we delivered on all three areas of our strategic plan, resulting in growth in new business wins, a more stable cash runway, and greater clarity on our future direction. The sales successes in the year combined with the significant improvement in customer renewals enabled us to achieve our target of double-digit Underlying MRR growth in the year.

The successful reignition of our marketing activities was key to building a strong sales pipe which we are confident will continue to deliver.  We proved during the year we could convert these deals into new wins, and quickly demonstrate value to our customers, ensuring higher levels of renewals and expansion deals. The efforts we made to re-build our sales momentum mean we are continuing to deliver a consistent volume of well verified leads each month and currently have a further fifteen trial implementations in progress, providing visibility on the pipeline into the new year.

For the i-nexus workbench product, we invested heavily in those areas that simplify use for quicker and easier adoption which has provided much deeper engagement during both the sales journey and customer deployment.

Trading

We secured a record number of new customers in the year, winning nine new logos (FY21: four), which along with the existing account upsells and lower levels of churn, delivered an exit Underlying MRR for the year uplift of 12% to £250k MRR (FY21: £223k, Reported MRR £235k). As is typical with our new customers, each of these wins services limited business areas or teams within the customer and so each presents considerable expansion opportunities.

We renewed over 90% of our customers, a considerable improvement on the prior year, and expanded the use of our software within four existing accounts (FY21: two). The improvement in renewal rates reflects the rigour and routine we have brought to the review of accounts with our customer stakeholders, and the release of enterprise software budgets following the freeze experienced during Covid times.

Fundamental to these successes has been our increased understanding of where we sit within the competitive market landscape. We are now clearer on our differentiators and confident our platform is the best in class to support enterprise level strategy execution - a view confirmed to us by our prospects.

We continue to refine our sales approach to ensure we are best placed to capture this growing market. Areas of improvement include streamlining the onboarding process to under 30 days, ensuring ROI and customer value are front and centre of the sales discussion and simplification of our initial product demonstrations, particularly around our key differentiator: our ability to deliver Hoshin Kanri methodology.

We continue to be approached by a range of potential partners and will consider ways to capitalise on this interest in the year ahead.

Market opportunity

All businesses set goals, plan how to deliver them and track performance. The challenge is if they can do this at pace, with insight and high levels of visibility across their complex ecosystems where i-nexus' software delivers considerable value.

Our software category - Strategy Execution Management (SEM) - continues to evolve and gain momentum as companies accelerate digitalising mission-critical processes in this post pandemic world. Faced with market uncertainty, this "new normal" future requires companies to increase responsiveness by dynamically managing their strategic plan; something that we believe simply cannot be achieved on spreadsheets and other conventional productivity tools.

The growing importance of the SEM market has been acknowledged by leading analysts including Gartner Research, with SEM now considered an integral part of the new Strategy Portfolio Management (SPM) software category.  We have seen greater demand for strategy execution post-Covid, in response to the "no normal" business environment. And while we have seen a higher level of smaller software providers entering the market, with SME targeted offerings, we continue to dominate the enterprise level part of the market.

Our competitive strength

We are seeing an increased sophistication in our market, with prospects frequently now coming to us with very well thought through capability requirements, having pre-evaluated i-nexus against the competition on a matrix of criteria. 

We continue to see that i-nexus has several clear advantages in strategy execution against SPM vendors: the market leading Hoshin Kanri capabilities built into our platform, including our X-Matrix; the configurability and flexibility of the platform; the depth of functionality including powerful strategic planning and performance management capabilities that complement portfolio management features; and proven enterprise readiness.

In addition to the above, i-nexus' customers benefit from insight gained from over fifteen years of market experience in strategy execution. Our experience and long-standing in the industry also mean our software is calibrated to integrate smoothly into an enterprise's existing strategy processes.

People

We have a talented, committed team at i-nexus, all pulling in the same direction and now delivering better results. The results this year are even more impressive when taking into account the considerably reduced size of the team. Each person has gone above and beyond to grow sales momentum, develop our products and deepen customer relationships, and the Board would like to once again thank them all for their commitment.

During the year we spent time on various activities to help strengthen our team and ensure we have the right qualities and shared purpose to take us forward. These included defining our Vision and Values, introducing improvements to our employment packages, even more rigorous hiring processes and the select expansion of our teams to ensure we had sufficient depth to properly service our existing customer base. As a result of these measures, we have a strong, cohesive team, working together to deliver on our growth plan.

Strategic focus for the year ahead

Our strategy for the current year is focused on three main programs of work:

1.            To accelerate the landing of new logos - which we will achieve though continuing to reduce friction in buying i-nexus and enhancing the trial experience.

2.            Prove our ability to expand within accounts - with nine new logos secured in FY22, proving we can grow these accounts is key. We are launching an updated set of value measures and increased customer marketing and forums.

3.            Improve the customer experience within our Workbench product - developing key insights and output screens as requested by customers.

We believe through continued focus on these programs, we will drive the success of the business.

Innovation

This year and next year we will continue to focus our innovation efforts on increasing the usability of our platform and the delivery of valuable insights. Through this we intend to increase growth from existing customers which is a key component to our land and expand sales model; providing focus on giving the best user experience, eliminating waste and delivering valuable insight.

Being a software/product company, we continually look at product innovations in our space. This last year and next year are no different. We have a number of potential product candidates, currently being assessed for customer validation, that we hope to take through to a minimal viable product in the year ahead.

Current Trading and Outlook

Following the growth in MRR and our careful management of the impacts of cost inflation on the business, we continue to have clear visibility of our cash runway.

The growing interest in strategy software, the relaxation of enterprise software budgets, the enhancements we have made to our products and our increased sales and marketing skills, all combine to provide us with confidence in our outlook and ability to deliver another year of double digit MRR growth.

 

Simon Crowther

Chief Executive Officer

 

Chief Financial Officer's Report

Revenue

Licence revenues

Monthly recurring revenue ('MRR'), the key financial metric for the Group, grew by 12% in the year to £250k at 30 September 2022 (30 September 2021: £223k after adjusting for foreign exchange and IFRS adjustments, Reported MRR £235k) as the business secured a record nine new logos (FY21: four) alongside continuing to expand the use of our software in a growing number of accounts. These results represent a significant turnaround from both 2021 and 2020 (reduction in MRR of 23% and 10% respectively) as the Group's key markets were disrupted by the onset of the pandemic.

Highlighting both the increasing strength of our client relationships and the release of enterprise software budgets following the freeze experienced during the last two years, net retention in the year was 98% (FY21: 74%). As expected, software revenues recognised in 2022 reduced to £2,857k (FY21: £3,333k) due to the lagged impact of the exceptional levels of non-renewing contracts the business experienced in the prior year.

As a consequence of our subscription revenue model, the new customer successes achieved in the year and growing expansion opportunities in our base set the business up well to return to software revenue growth in FY23. This view is further supported by the business securing three new logos and one account expansion in Q1 2023 delivering £12k of net MRR growth.

Services revenues

Revenue from associated professional services was broadly in line with prior-year levels at £270k (FY21: £306k) despite the 40% reduction cited at the half year against H1 2021. The uplift in H2 reflects the timing of delivering new customer deployments and existing change orders, a trend expected to continue into H1 FY23 underpinned by the deferred revenue balance related to services at 30 September 2022 being three times higher than at 30 September 2021.

Gross Margin

Gross Margin in the year remained stable at 79% (FY21: 83%) with the reduction in revenue driving the fall from £3,004k to £2,461k.

Reported Gross Margin is the combined gross margin over both recurring software subscriptions and professional services.

Adjusted EBITDA

Adjusted EBITDA (EBITDA excluding the impact of impairment, loss on disposal of assets, share-based payments and non-underlying items) totalled a loss of £552k for the period (FY21: loss of £257k), with the fall in gross margin of £542k being constrained by a drop in overhead costs of £247k reflecting the full impact of the cost control initiatives undertaken last year.

Whilst the Group's continuing focus is to return to EBITDA breakeven, during the second half of 2022 the business decided to accelerate a select number of investments both in its existing employee base to preserve retention and in additional resource needed for operational delivery. The strengthening of the team was considered fundamental to the Group realising the market opportunity and delivering on the next stage of its growth strategy.

There are currently no plans to make further investments in FY23 until such time as revenue growth is delivering a positive Adjusted EBITDA. 

Depreciation, amortisation and impairment

Total costs in respect of depreciation, amortisation, and impairment were £385k in FY22 (FY21: £552k). With the business having low capital expenditure requirements, the value is principally made up of amortisation on intangible assets, being capitalised development costs, (£165k, FY21: £79k) and any subsequent impairment charges (£155k, FY21: £294k).

These costs are reflective of the continual evolution of the market in which the Group operates, the needs of its customers, both present and prospective, and the Group's agile approach to continually developing and improving its offering.

Non-underlying items

Non-underlying items in the prior year totalling £144k comprise redundancy costs and professional and consultancy fees relating to the raising of finance. No such costs were incurred in FY22.

Statutory results

The Group reported a loss before taxation for the year of £1,105k (FY21: £1,133k).

Cash and cash equivalents

The Group had cash & cash equivalents at 30 September 2022 of £99k (FY21: £575k), with the end of the financial year representing a cash low point for the business given the seasonality in cash flows arising from the timing of the invoicing and collection of the Group's recurring revenue, the majority of which is billed during Q1 and Q2.

During the year, we delivered on a key financial objective during FY22, to become self-sufficient in working capital terms. This enabled us to complete a select number of additional one-off strategic investments from within our own cash resources, strengthening our team as we head into FY23. Driving this outcome was a £725k reduction in the net outflow of funds from operating activities (FY22: (£237k, FY21: £962k) reflecting the impact of new business successes, improved service billing and a strong renewal performance.

Careful cash management will continue to be a priority focus for the Board. As previously outlined, there are currently no plans to increase the existing cost base in the coming year until such time that revenue growth delivers a position of at least Adjusted EBITDA breakeven.

The Group also continues to apply treasury and foreign currency exposure management policies where possible to minimise both the cost of finance and our exposure to foreign currency exchange rate fluctuations.

Net debt at 30 September 2022 was £1,710k (FY21: £1,321k). On 30 September 2022, the Company agreed with the holders of the £1,325k Convertible Loan Notes to extend the redemption date from 4 November 2023 to 4 November 2024, see note 7 for further details.

The Group prepares budgets, cashflow forecasts and undertakes scenario planning to ensure that the Group can meet its liabilities as they fall due. The Board's assessment in relation to going concern is included in note 2 of this report.

Balance sheet

Trade receivables (net) have increased to £604k due to the timing of receipt of annual licence fee and subscription invoices issued in the final months of the year (FY21: £557k).

The growth in the Group's MRR and accompanying services resulted in deferred revenue increasing to £1,320k at 30 September 2022 (FY21: £1,030k). The Group's cash collection disciplines remain strong with DSO (debtor days) at 30 September 2022 of 60 (2021: 70).

Principal risks and uncertainties

The Group's principal risks and uncertainties are set out in note 9 of this report.  

 

Drew Whibley

Chief Financial Officer

 

Primary statements

Consolidated Statement of Comprehensive income

For the year ended 30 September 2022


2022

£

2021

£

Revenue

3,126,804

3,639,111

Cost of sales

(666,280)

(635,532)

Gross profit

2,460,524

3,003,579

Other operating income

-

88,316

Administrative expenses

(3,408,424)

(4,062,295)

Operating loss

(947,900)

(970,400)

Adjusted EBITDA

(552,357)

(256,873)

Depreciation, amortisation, impairment and profit/loss on disposal

(384,975)

(551,862)

Share based payment expense

(10,568)

(17,181)

Non-underlying items

-

(144,484)

Investment revenues

68

65

Finance costs

(231,288)

(162,855)

Other gains and losses

73,845

-

Loss before taxation

(1,105,275)

(1,133,190)

Income tax income

234,391

398,258

Loss for the year

(870,884)

(734,932)

Other comprehensive income:



Items that will not be reclassified to profit or loss



Currency translation differences

(486)

17,346

Total items that will not be reclassified to profit or loss

(486)

17,346

Total other comprehensive income for the year

(486)

17,346

Total comprehensive income for the year

(871,370)

(717,586)


2022

2021


£

£

Earnings per share



Basic

(0.03)

(0.02)

Diluted

(0.03)

(0.02)

 

 

Consolidated Statement of Financial Position

 

As at 30 September 2022


2022

£

2021

£

Non-current assets



Intangible assets

915,696

1,099,313

Property, plant and equipment

26,413

67,111


942,109

1,166,424

Current assets



Trade and other receivables

781,838

791,948

Current tax recoverable

224,000

275,000

Cash and cash equivalents

98,987

575,203


1,104,825

1,642,151

Total assets

2,046,934

2,808,575

Current liabilities



Trade and other payables

682,840

952,157

Borrowings

9,707

71,425

Deferred revenue

1,319,674

1,030,315


2,012,221

2,053,897

Net current liabilities

(907,396)

(411,746)

Non-current liabilities



Trade and other payables

254,407

88,330

Borrowings

32,387

42,094

Convertible loan notes

1,766,925

1,782,458


2,053,719

1,912,882

Total liabilities

4,065,940

3,966,779

Net liabilities

(2,019,006)

(1,158,204)

Equity



Called up share capital

2,957,161

2,957,161

Share premium account

7,256,188

7,256,188

Foreign exchange reserve

1,390

1,876

Share option reserve

20,062

12,989

Equity reserve

231,851

231,851

Merger reserve

10,653,881

10,653,881

Retained earnings

(23,139,539)

(22,272,150)

Total equity

(2,019,006)

(1,158,204)

 

Consolidated Statement of Changes in Equity

 

For the year ended 30 September 2022

 


Share
capital

£

Share premium account £

Equity reserve

£

Merger reserve

£

Foreign exchange reserve £

Share option reserve £

Retained earnings

£

Total

£

Balance at

1 October 2020


2,957,161

7,256,188

                 -                        10,653,881

(15,470)

                  -                         (21,541,410)

(689,650)

Year ended

30 September 2021:
Loss for the year
Other comprehensive
income:

Exchange differences
on foreign operations


-

-

-

-

-

-

-

-

-

17,346

-

-

(734,932)

-

(734,932)

17,346

Total comprehensive
income for the year


-

-

-

-

17,346

-

(734,932)

(717,586)

Transactions with owners

in their capacity as owners

Issue of convertible

loan

Share option expense

in the year

Share options cancelled


-

-

-

-

-

-

231,851

-

-

-

-

-

-

-

-

-

17,181

(4,192)

-

-

4,192

231,851

17,181

-

Total contributions by and

distributions to owners

of the Company

recognised directly in equity


-

-

231,851

-

-

12,989

4,192

249,032

Balance at

30 September 2021


2,957,161

7,256,188

231,851

10,653,881

1,876

12,989

(22,272,150)

(1,158,204)

Year ended

30 September 2022:
Loss for the year
Other comprehensive
income:

Exchange differences
on foreign operations


-

-

-

-

-

-

-

-

-

(486)

-

-

(870,884)

-

(870,884)

(486)

Total comprehensive
income for the year


-

-

-

-

(486)

-

(870,884)

(871,370)

Transactions with owners

in their capacity as owners

Share option expense

in the year

Share options cancelled


-

-

-

-

-

-

-

-

-

-

10,568

(3,495)

-

3,495

10,568

-

Total contributions by and

distributions to owners

of the Company

recognised directly in equity


-

-

-

-

-

7,073

3,495

10,568

Balance at

30 September 2022


2,957,161

7,256,188

231,851

10,653,881

1,390

20,062

(23,139,539)

(2,019,006)

 

Consolidated Statement of Cash Flows

 

For the year ended 30 September 2022

 


£

2022

£

£

2021

£

Operating activities





Loss after tax


(870,884)


(734,932)

Adjusted for non-cash items:





Taxation credit


(234,391)


(398,258)

Amortisation, depreciation,
and adjustments on disposal


384,975


551,862

Share-based payment expense


10,568


17,181

Finance income


(68)


(65)

Finance charges


231,288


162,855

Decrease in provisions


-


(80,702)

Other gains


(73,845)





(552,357)


(482,059)

Decrease in trade and other
receivables


10,126


78,059

Increase/(decrease) in trade
and other payables


20,043


(980,799)

Cash used in operations


(522,188)


(1,384,799)

Income tax refunded


285,391


423,258

Net cash outflow from operating activities


(236,797)


(961,541)

Investing activities





Purchase of intangible assets -
internally generated

(136,234)


(335,446)


Purchase of property, plant and equipment

(24,443)


(1,171)


Proceeds on disposal of property, plant and equipment

-


1,180


Interest received

68


65


Net cash used in investing activities


(160,609)


(335,372)

Financing activities





Issue of convertible loans

-


1,937,500


Repayment of borrowings

(71,425)


(179,981)


Proceeds of new bank loans

-


50,000


Payment of lease liabilities

-


(37,467)


Interest paid

(6,899)


(35,216)


Net cash (used in)/generated from financing activities


(78,324)


1,734,836

Cash and cash equivalents at
beginning of year


575,203


120,011

Effect of foreign exchange rates


(486)


17,269

Cash and cash equivalents at end of year


98,987


575,203

 

Notes to accounts

1.            General information

i-nexus Global plc is a public company limited by shares incorporated in England and Wales (registration number 11321642). The registered office is 27-28 Eastcastle Street, London, W1W 8DH. The Group's principal activities and nature of its operations are disclosed on page 2 of this report.  

The Group consists of i-nexus Global plc and all of its subsidiaries.

Significant accounting policies

The following principal accounting policies have been used consistently in the preparation of consolidated financial information for i-nexus Global plc and its subsidiaries (the 'Group').

Basis of preparation              

The financial information has been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted for use in the United Kingdom and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

The financial information is prepared in sterling, which is the functional currency of the Group. Monetary amounts in this financial information are rounded to the nearest £1.

This financial information has been prepared applying the accounting policies applied in the Group's most recent publicly available financial statements.

The financial information incorporates the results of i-nexus Global plc and all of its subsidiary undertakings as at 30 September 2022.

Going concern

After reviewing the Group's forecasts and projections, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future, being a period of at least twelve months from the date of approval of these financial statements. The Group therefore continues to adopt the going concern basis in preparing its financial statements. Information used to make this decision is detailed below.

A scenario testing exercise, in which the Directors prepared detailed cash flow forecasts for the period covered by the going concern forecast, was performed. The forecasts take into account the Directors' views of current and future economic conditions that are expected to prevail over the period including assumptions regarding the sales pipeline, future revenues and costs with various scenarios which reflect growth plans, opportunities, risks and mitigating actions. Alongside managements base case forecast, the Group prepared an extreme downside scenario where, outside of the deals secured in Q1 2023, any growth in MRR across the period would be offset by non-renewals, reducing total billing across recurring and services revenue by £510k. Under this extreme scenario, the Group has given consideration to the potential actions available to management to mitigate the impact of these sensitivities, in particular the discretionary nature of costs incurred by the Group, in order to ensure the continued availability of funds. Financial performance in 2023 is not expected to be materially impacted from current year levels due to the long-range revenue visibility achieved through the recurring revenue business model. These recurring revenues, representing 90% of total revenue, are considered resilient given the majority are on multi-year terms. The forecast also assumed that the Group does not have access to any further external funding. Based on current trading, the stress test scenario is considered very unlikely.

The Group continues to monitor the collection of monies from clients with no material delays in payment being cited. The business benefits from an Annual Licence Fee Model in which software Licence fees are received annually in advance.

Abridged financial information

This preliminary announcement has been prepared in accordance with the basis of preparation set out above. Whilst the financial information included in this preliminary announcement has been prepared in accordance with IFRS, this announcement does not itself contain sufficient information to comply with IFRS. This preliminary announcement constitutes a dissemination announcement in accordance with Section 6.3 of the Disclosures and Transparency Rules (DTR).

 

2.            Revenue and segmental reporting

 

The Group has one single business segment and therefore all revenue is derived from the rendering of services as stated in the principal activity. The Group operates in six geographical segments, as set out below. This is consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance, has been identified as the management team comprising the executive directors who make strategic decisions.

 

Revenue analysed by class of business

 

Year ended

30 September 2022

£

 

 

Year ended

30 September 2021

£

 


 

 

 

 

Licence

2,856,720

 

3,333,407

 

Services

270,084

 

305,704

 


3,126,804

 

3,639,111

 

Revenue analysed by geographical market

 

Year ended

30 September 2022

£

 

 

Year ended

30 September 2021

£

 


 

 

 

 

United Kingdom

716,295

 

853,663

 

United States

882,707

 

1,211,192

 

Switzerland

639,380

 

629,921

 

Germany

538,561

 

329,959

 

Rest of Europe

190,976

 

476,513

 

Rest of the World

158,885

 

137,863

 


3,126,804

 

3,639,111

 

 

 

Other significant revenue

 

Year ended

30 September 2022

£

 

 

Year ended

30 September 2021

£

 


 

 

 

 

Grant income

-

 

88,316

 

Grants of £88,316 were received in the prior year as part of the Government's initiatives to provide immediate financial support as a result of the COVID-19 pandemic. There are no future related costs associated with these grants which were received solely as compensation for costs incurred in the year.

 

3.            Adjusted EBITDA

 

The calculation of Adjusted Earnings is consistent with the presentation of Adjusted Earnings before Interest, Tax, Depreciation, and Amortisation, as presented on the face of the Statement of Comprehensive Income. This adjusted element also removes non-underlying items which, in the prior year, comprise COVID-19 related redundancy costs and professional and consultancy fees relating to the raising of finance. There were no such costs in the current year.

 

The Directors have presented this Alternative Performance Measure ("APM") because they feel it most suitably represents the underlying performance and cash generation of the business, and allows comparability between the current and comparative period in light of the rapid changes in the business, and will allow an ongoing trend analysis of this performance based on current plans for the business.

 

4.            Earnings per share

 

The earnings per share has been calculated using the loss for the year and the weighted average number of ordinary shares outstanding during the year, as follows:

 


Year ended

30 September 2022

Year ended

 30 September 2021


£

 

Loss for the period attributable to equity holders of the company

(870,884)

(734,932)

Weighted average number of ordinary shares (for basic and diluted earnings per share

29,571,605

29,571,605

Earnings per share (basic and diluted)

(0.03)

(0.02)

The Diluted EPS is the same as the basic EPS in the current and comparative year as the Group has incurred losses in each of the periods concerned. The Group has a number of potentially dilutive share options and convertible redeemable loan stock that could dilute the earnings per share should the Group become profitable. As at 30 September 2022 both the share options and the convertible loan stock are out of the money.

 

5.            Borrowings






At 30 September 2022

£

 

At 30 September 2021

£


Current









Bank loans





9,707


7,906


Other loans





-


63,519
















9,707


71,425











Non-current









Bank loans





32,387


42,094
















32,387


42,094











Total borrowings





42,094


113,519


 

 









The Group had the following borrowings at 30 September 2022:

 

·    A Bounce Back Loan Scheme loan within bank loans which has an interest rate of 2.5% payable from November 2021 when the government grant incentive period expires. The loan is carried at £42,094 in the financial statements. This loan is unsecured.

 

·    Venture debt, within other loans in the prior year, has a fixed interest rate of the higher of 11.5% per annum or LIBOR plus 8% per annum and is measured at amortised cost. The venture debt is secured by way of fixed and floating charges over the title of all assets held by the Group. The venture debt has been repaid in full during the current year.

 

The directors consider the value of all financial liabilities to be equivalent to their fair value.

 

7.            Convertible Loan note

 

The convertible loan notes consist of two tranches issued during the prior year. The first tranche was issued on 4 November 2020 with total proceeds of £1,325,000 and the second tranche was issued on 29 September 2021 with total proceeds of £650,000.

 

When issued, both tranches had a redemption date 3 years following their date of issue. The loan note holders are entitled, before the redemption date, to convert all or part of their holding of loan notes into fully paid Ordinary Shares on the basis of 1 Ordinary Share for every 10p of principal nominal amount of loan notes held, or, convert all or part of their holding of loan notes into fully paid Ordinary Shares at the conversion rate; and/or redeem all or part of their holding of loan notes.

 

At the issue date the net proceeds received were split between the financial liability element of £1,743,149 and an equity component of £231,851, representing the fair value of the embedded option to convert the financial liability into equity. The equity component of the convertible loan notes has been credited to the equity reserve.

 

On 30 September 2022, the redemption date of the first tranche was extended by a further year, to give a revised redemption date of four years following the original date of issue, being November 2024. This modification was not considered to be substantial, as defined in IFRS 9, therefore the existing liability was re-calculated as the present value of the revised future cash flows discounted at the original effective interest rate. A gain of £73,845 on the modification of the liability has been recognised in other gains and losses.

 

The extension to the redemption date is a modification only of the existing convertible loan notes and therefore has no impact on the equity element.

 

The liability component is measured at amortised cost, and the difference between the carrying amount of the liability at the date of issue and the amount reported in the statement of financial position represents the effective interest rate less interest paid to that date.

 

The convertible loan notes carry a coupon rate of 8% and are recognised at their net present value using a discount rate of 12%.

 

 

 

                          

 

Liability

£

 

Issue of convertible loan note



1,743,149

Interest charged



127,639

Interest accrued



(88,330)

Liability component at 30 September 2021



1,782,458

Interest charged



224,389

Interest accrued



(166,077)

Gain on modification



(73,845)

Liability component at 30 September 2022



1,766,925

8.            Share capital


 


 


                          

At 30 September 2022

 

At 30 September 2021

 

 

 

£

 

£

 

Authorised, allotted, called up and fully paid





 

29,571,605 (2020: 29,571,605) Ordinary shares of £0.10 each


2,957,161


2,957,161

 

Fully paid shares carry one vote per share and carry rights to a dividend.

 

9.            Principal risks and uncertainties

 

The Board of the Company regularly reviews business risk and the Group's appetite for risk relative to its goals. There are a number of potential risks and uncertainties, some of which could have a material impact on the Group's performance, and therefore could cause actual results to differ materially from those expected.

 

Set out below are the significant business risk areas identified, together with an overview of the mitigating factors considered by the Board. This is not an exhaustive list of the risks faced by the Group and is not necessarily presented in order of priority.

 

Risk

Description

Mitigation

Working capital

Vulnerability of the Group's long term working capital.

 

 

 

Whilst the Directors believe that the improvement in sales conversion seen in FY22 is sustainable, the Group's working capital position is still exposed should this weaken and/or its expected growth with existing accounts be lower than planned in FY23.

The Group's continuing viability in the longer term remains critically dependent on its ability to secure new sales and expand the use of the software in existing accounts.

It is possible that the Group will experience a slower and/or lower sales conversion rate than the Directors have modelled within their base case financial projections. This could in turn have a material adverse effect on the Group's business, results of operations, financial condition and prospects.

 

Trend: Level risk

The Group prepares regular business forecasts and monitors its projected cash flows, which are reviewed by the Board.

The scenarios and sensitivities demonstrate that there are mitigating actions management can implement should the plans not deliver the expected sales growth.

 

 

Risk

Description

Mitigation

Market & product development

The strategy market may not evolve as expected or our products fail to meet the expectations of the market.

 

Whilst the Board believes that there is strong evidence of an increasing trend to digitalise strategy by its target customers, a large proportion of the Group's target market continues to use traditional methods and in-house developed systems.

 

Although the Group has achieved its market position through a deep understanding of the market, and the 10 years of development of its i-nexus software, there is no guarantee that either our product continues to meet customer expectations or that the Group's competitors and potential competitors (who may have significantly greater financial, marketing, service, support, technical and other resources than the Group) may be able to develop competing products, respond more quickly to changes in customer requirements and devote greater resources to the enhancement, promotion and sale of their products, which could have a negative impact on the Group's business.

 

 

Trend: Level risk

The Group has internal sales and marketing functions, which are also supported by a network of consulting partners, that work with potential customers to educate them on the benefits of digitising strategy and the associated benefits the product can offer an organisation.

The rate of incoming enquiries supports the view that recent events appear to have made the need to digitise strategy more widely accepted.

The Board feels that recent enhancements along with the Group's product strategy and R&D focus mitigates this risk. The Board monitors user satisfaction and the extent to which the software continues to meet customer expectation through various channels, including on the G2 platform.

 

Account Proliferation

Failure of our existing accounts to grow as planned, resulting from dissatisfaction with the product and/or deployment issues.

 

An important aspect of the Group's growth strategy is to proliferate sales of its i-nexus software with existing customers as a result of the natural evolution of the software use over time. Although the Group has a number of examples where this has occurred in the past, this is no guarantee that it will continue to happen at the increasing rate predicted. Any failure of this anticipated account proliferation occurring will impact the Group's future success and adversely affect its business, prospects and financial position.

 

Trend: Reducing risk

Many of the new logos signed in FY22 were "Land and Expand" opportunities with clear intent, whereby a smaller subset of a much larger future deployment have commenced using the product first. The Board expect to see the beneficial impact of this strategy in FY23 and have taken measures to increase the number of Success Managers in the year. This team's efforts at growing our existing accounts has been assisted by the recent product enhancements aimed at improving user experience.

The Board continue to monitor the efficacy and outcomes of the Group's efforts in growing existing accounts.

 

 

Risk

Description

Mitigation

Dependence on key Customers

Failure to retain our larger key customers.

 

 

 

A small group of key customers provide approximately half of the Group's MRR, with one representing nearly 20 per cent of closing MRR. The Group's financial performance is therefore partly dependent on the continued business relationship with these key customers.

Failure to manage the ongoing renewal of the contracts with these key customers on a commercially acceptable basis could materially affect the Group's operations and/or its financial condition.

 

Trend: Level risk

The majority of this small group of customers are in contracts with a remaining term of more than one year and all bar one of them have been longstanding clients for a period of at least five years and, in the case of two of them, ten years.

As previously reported, the Group has a dedicated team of long-standing experienced professionals acting as Success Managers. They have well-established processes and reporting that allow them to get early warning of any issues.

Whilst this cannot guarantee renewal of all customers in the face of disruptive external factors that we cannot reasonably foresee or manage, the overall risk level is aligned with FY22 where the business achieved its highest retention rates.

 

 

Security Breaches and Cyber Attacks

Vulnerability of the Group's systems to security breaches or cyber attacks.

 

The Group is a Data Processor for its customers' confidential data. Although the Group is ISO27001 accredited and therefore employs security and testing measures for the software it deploys and the broader security environment is well documented, these measures may not protect it from all possible security breaches that could harm the Group or its customers' business. Given the reliance of the business on its information technology systems, the software is at risk from cyber attacks. Either of these security events may result in significant costs being incurred and other negative consequences including reputational damage.

 

Trend: Level risk

The Group takes its Information Security very seriously as demonstrated by its ISO27001 accreditation. Employees are trained in this area to ensure best practice measures are followed for Information Security.

The Group utilises the latest security products such as end point security systems, with staff receiving regular security awareness training and testing. The security regime is regularly reviewed, and the Group invests in state-of-the-art systems to keep both its cloud platform and office networks protected against cyber-attack.

In addition, our systems are subjected to frequent and rigorous third-party penetration testing to help ensure our system integrity.

The Group has cyber security insurance in place and the Group endeavors to secure limitations of liability clauses in its customer contracts.

 

Risk

Description

Mitigation

Recruitment & retention

Risk of failing to attract and/or retain key personnel.

 

As the Group grows it has a dependence on the recruitment and retention of highly skilled employees and an ongoing reliance on a limited number of key personnel, including the Directors and senior management, who have significant sector experience.

The job market is increasingly competitive in the cloud technology sector, particularly following the pandemic and subsequent acceleration of cloud adoptions and digital transformation trends.

The business requires specialist technical skills that can be scarce.

If members of the Group's key senior team depart, the Group may not be able to find effective replacements in a timely manner, or at all, and its business may be disrupted.

 

Trend: Level risk

The Group works closely with external parties to ensure competitive pay and benefits are being offered to both attract and retain people.

We continue to invest in people development and training initiatives to provide opportunities for career fulfillment and progression. Wherever appropriate we seek to develop and promote from within the existing staff pool.

The Group has invested heavily in this area in FY22 and is a continuing area of focus for FY23.

Executive and staff remuneration plans, incorporating long-term incentives, have been implemented to mitigate this risk.

 

Dependence on Channel Partners

Failure to develop this additional route to market effectively.

 

Part of the Group's strategy is to increasingly sell its software through channel partners. There are no guarantees that sufficient channel partners will be found to sell the Group's software at the rates planned.

The Directors are confident that engagements to date by existing and prospective channel partners provide strong evidence of the opportunity available. However, unlocking this potential has proven to be difficult in recent years and failing to have productive channel partners in the future could affect the Group's future success.

 

Trend: Level risk

Renewed efforts in relation to the evolution of this strategic theme will take place in FY23 as investment in resource is unlocked by growth. The Board will closely monitor progress.

 

Risk

Description

Mitigation

Financial risk management

The principal financial instruments used by the Group, from which financial risk arises, are trade receivables, cash at bank, trade and other payables.

Credit risk

Credit risk is the risk of financial loss to the Group if a partner or customer fails to meet its contractual obligations.

 

 

 

 

 

 

 

 

 

Liquidity risk

Liquidity risk arises from the Group's management of working capital. It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due.

 

 

 

 

 

 

Currency risk

As a consequence of the Group's exposure transacting in foreign currencies there are risks associated with changes in foreign currency exchange rates.

The Group is based in the United Kingdom and presents its consolidated financial statements in pounds Sterling.

The Group's current revenues are generated primarily in Sterling, US dollar and Euros. The Group also has some contractual obligations that are denominated in US Dollars.

 

 

 

 

 

 

Trend: Level risk

The Group is principally exposed to credit risk from credit sales and/or bank default. It is Group policy to assess the credit risk of new customers and partners before entering new contracts and it has a frequent and proactive collections process.

Under the terms of our contracts many services are charged for in advance of delivery, thus mitigating the risk further.

 

Trend: Level risk

On a monthly basis, the Directors review the Group's trading to date, the Group's full year financial projections as well as information regarding cash balances, debtors, trading and prospects. This allows the Directors to form an opinion as to the working capital of the Group and its likely future requirements in order to plan accordingly.

 

 

Trend: Level risk

All geographies addressed by the Group can be readily serviced from the UK. The Group applies treasury and foreign currency exposure management policies to minimise both the cost of finance and our exposure to foreign currency exchange      rate        fluctuations.

Notwithstanding        these hedging
arrangements, the Group does have exposure to translation effects arising from movements in the relevant currency exchange rates against sterling. Therefore, there can be no assurance that its future results or resources will not be significantly affected by fluctuations in exchange rates.

 

Risk

Description

Mitigation

 

Inflation risk

Inflation risk has been very limited for most of the last decade. However, as with many technology businesses, the Group is experiencing increased inflationary pressures within its cost base. The timing of a customer's invoice for their typically annually in advance software fee can also contribute to a delay in inflationary pressures being passed to customers.

 

Trend: Increasing risk

The Board acknowledge that inflationary pressure is now mounting with certain vendors already applying increases as a result. The Board have agreed that a review of the Group's vendor base and accompanying pricing model be undertaken as a potential countermeasure to ensure margins are preserved.

 

 

 

10.          Forward-looking Statements

 

This document contains forward-looking statements that involve risks and uncertainties. All statements, other than those of historical fact, contained in this document are forward-looking statements. The Group's actual results could differ materially from those anticipated in the forward-looking statements as a result of many factors. Investors are urged to read this entire document carefully before making an investment decision. The forward-looking statements in this document are based on the relevant Directors' beliefs and assumptions and information only as of the date of this document, and the forward-looking events discussed in this document might not occur. Therefore, Investors should not place any reliance on any forward-looking statements. Except as required by law or regulation, the Directors undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future earnings or otherwise.

 

It should be noted that the risk factors listed above are not intended to be exhaustive and do not necessarily comprise all of the risks to which the Group is or may be exposed or all those associated with an investment in the Group. In particular, the Group's performance is likely to be affected by changes in market and/or economic conditions, political, judicial, and administrative factors and in legal, accounting, regulatory and tax requirements in the areas in which it operates and holds its major assets. There may be additional risks and uncertainties that the Directors do not currently consider to be material or of which they are currently unaware, which may also have an adverse effect upon the Group.

 

11.          Availability of Report and Accounts

 

The audited report and accounts for the year ended 30 September 2022 will be published and posted to shareholders in due course. Following this a soft copy of the report and accounts will also be available to download from the Group's website, www.i-nexus.com.

 

                                                   

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